Guernsey: High Standards Pave The Way For Sector Development

Fiona Le Poidevin, chief executive of Guernsey Finance, looks
at the issues affecting the private client industry and how
Guernsey is responding.

On Monday 9 September, UK Prime Minister David Cameron told a
sitting of the House of Commons: "I do not think it is fair
any longer to refer to any of the Overseas Territories or Crown
Dependencies as tax havens. They have taken action to make sure
that they have fair and open tax systems. It is very important that
our focus should now shift to those territories and countries that
really are tax havens. The Crown Dependencies and Overseas
Territories, which matter so much – quite rightly – to
the British people and members have taken the necessary action and
should get the backing for it."

These comments follow two letters from the Prime Minister
earlier in 2013 when he wrote to the leaders of the Crown
Dependencies and Offshore Territories and recognised their right to
be "lower tax jurisdictions"; and personally wrote to
Guernsey's Chief Minister, Peter Harwood, to praise the
island's leadership in meeting international standards of
transparency and exchange of information for tax purposes. Now, you
might expect us to be particularly pleased with this series of
comments and in particular, the reference that the island should no
longer be considered a tax haven. But, it is our belief that the
tax haven label has been unfairly applied to Guernsey for quite
some time.

High standards

For example, at the summer G8 meeting in Northern Ireland, great
weight was given to the declaration that there was agreement to
'National Action Plans' regarding beneficial ownership when
in fact Guernsey has had equivalent standards in place since 2000.
In addition, while some jurisdictions are only now moving towards
automatic exchange of information, it is something Guernsey has
embraced since 2011 under measures equivalent to the EU Savings Tax
Directive.

The Island has also signed an Inter-Governmental Agreement with
the UK which enhances the automatic tax information exchange
provisions already in place between the two, and is similar to the
Model I type agreement Guernsey signed in December with the US
relating to the Foreign Account Tax Compliance Act (FATCA).

Guernsey also meets the European Commission's criteria for
what is not a tax haven. It says that a third country cannot be
considered a tax haven if it: firstly, implements the international
standard for transparency and exchange of information; and also
secondly, does not operate tax measures which are considered
harmful in the areas of business tax. Guernsey meets both these
criteria and therefore, is clearly not a tax haven in the view of
the European Commission. Likewise, we were among the first set of
jurisdictions to be placed on the OECD 'whitelist' in 2009
and subsequent Global Forum reports have continued to recognise the
island as within the top tier of jurisdictions meeting
international tax standards and thereby helping to protect global
stability.

We have demonstrated this by the signing of 46 Tax Information
Exchange Agreements (TIEAs) and 20 full and partial Double Taxation
Arrangements (DTAs). In 2011 the IMF reported Guernsey as being
compliant or largely compliant with 47 out of 49 of the Financial
Action Task Force (FATF) recommendations on Anti-Money Laundering
(AML) and Countering the Financing of Terrorism (CFT) - the highest
standard of any jurisdiction so far assessed, including the UK and
the US as well as our competitor territories.

This is just a snapshot of some of the measures Guernsey has met
in recent years. Clients and practitioners respect Guernsey as a
place to do business and gain comfort in the fact that we are not
secret but transparent, yet we also retain confidentiality for
clients. This positioning has provided Guernsey with a secure
platform to further expand the range of wealth management services
it offers.

Image rights

One of the most notable developments came at the end of 2012
when Guernsey became the first jurisdiction globally to recognise
image rights in law and provide them with a register.
Traditionally, the main way to protect the IP in a personality has
been through trade mark rights.

While there are other related IP rights that come into play,
such as copyright and design rights, they only go so far in
protecting the rights of the modern celebrity, whose interests are
more wide ranging than have historically been the case.
Guernsey's image rights law has opened up a new chapter in
asset protection and exploitation management. While initial take-up
has been steady, if not spectacular, the register achieved its
biggest coup in October when Manuel Pellegrini, manager of English
Premier League side Manchester City, registered his image rights.
Other big names on the island's image rights register include
British tennis star Heather Watson, UK model Megan Williams and
international DJs Tiesto and Afrojack.

The image rights offering can also be utilised by corporate
entities, with a number already registered, but it is expected to
be particularly attractive to high-profile individuals. Placing
image rights on a statutory footing provides definition around the
person as the individual and the brand and can assist with
valuation. In doing so, this creates both certainty for tax matters
and also a commodity which can be both protected and exploited.

Foundations

The start of 2013 saw further evolution of the island's
private client offering with the introduction of the Guernsey
Foundation. It provides local practitioners with another tool
– in addition to the existing wide range of structures
available, such as trusts and companies – for meeting client
needs and in particular, asset protection, estate and succession
management, philanthropy and wealth planning for globally mobile
individuals and families.

Although the foundation has been available in other
jurisdictions for some time, our model is quite different from
others. It was tailored to meet the wishes of international private
client advisers, who wanted the opportunity to use a foundation
solution from a well regulated and respected jurisdiction, such as
Guernsey which, although renowned for administering trusts, has
built up considerable infrastructure and expertise in managing the
wealth of private clients. The introduction of foundations locally
provides clients with the ability to use the island even if they
were previously uncomfortable with the trust structure.

The common-law roots of the trust mean it is familiar to those
in the Anglo-Saxon world of the UK, US and Canada, for example, but
less well understood in civil law jurisdictions in continental
Europe and some of the 'emerging' markets which are the
major sources of new and rapidly growing private and corporate
wealth. Indeed, Guernsey has invested significant time and
resources building relationships and brand awareness in these
markets, notably in Asia where a growing number of Guernsey-based
firms, particularly in the fiduciary sector, have established
operations and increased their visibility in the region.

Family office

Another noticeable trend in recent years is the growing
popularity of family office services provided through Guernsey.
Increasingly globalised family interests have created the need for
an accessible central hub co-ordinating, structuring and managing
family assets and affairs, which can range from anything to do with
arranging pet care, household staff and educational investment to
philanthropic coordination, family governance and financial
investment. Guernsey's 40 minute flight time to London, coupled
with its convenient time zone, ensures that principals have easy
access to their offices.

In addition, they know through Guernsey that they can utilise a
variety of different structures and vehicles, such as Private Trust
Companies (PTC), the Guernsey pioneered Protected Cell Company
(PCC) or the recently introduced Guernsey Foundation amongst
others, to ensure that assets and investment strategies are managed
in a coherent manner.

The complexity of many family structures requires first class
service providers, something Guernsey with 50 years' experience
of servicing private clients and more than 150 licensed fiduciary
service providers has in abundance. These are then supported by a
network of professional services, such as global private banks and
multi-jurisdictional law and accountancy firms which have expertise
in dealing with the varied nature of private wealth management.
Furthermore, many of the world's largest banking institutions
are represented on the island.

Conclusion

Despite the Prime Minister's declarations in the House of
Commons earlier this year, I am fully aware that Guernsey is likely
to continue to be questioned by some as to the make-up of our
financial services industry. Nevertheless, it remains an exciting
time for our us with a number of new services available and we will
be doing everything we can to ensure that the island remains
attractive to prospective clients as a leading international
private wealth management centre for many years to come.

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